In rows, TESLA brings innovations to the automotive and energy sectors through electrification and digitization. TESLA will gain further competitive advantages through innovation, economies of scale and network effects and thus develop into a market participant in a narrow oligopoly.
TESLA invests in an ecology of sustainable energy and offers sought-after, innovative products and services. Ecology today includes the infrastructure of networked superchargers, destination chargers and upcoming gigachargers, as well as wall connectors, solar systems, solar roofs, power walls, power packs and megapacks. A patent application from TESLA shows the digital networking of all solar systems, energy storage devices and chargers despite different software technology. That is why I expect TESLA to have a digital transaction platform for the supply of sustainable energy in the future. In the long term, the platform, in combination with particularly durable systems, will reduce the costs of sustainable electricity to a few cents per kWh. The energy market addressed in this way is larger than the automotive market.
The Model S, Model X and Model 3 products demonstrate their competitive customer benefits every day, above all through their attractiveness, driving experience, long-distance suitability and low energy and maintenance costs. They are already substituting vehicles with internal combustion engines. They are long-lasting internet devices. The drivetrain and soon the battery are designed for 1 million miles or 1.6 million kilometers. TESLA updates existing vehicles with software updates over-the-air and with fast hardware replacement. Because the design is also timelessly functional, a TESLA can remain attractive and suitable for everyday use for decades and can replace around eight vehicles with an internal combustion engine over its lifetime. The vehicle market can therefore shrink considerably. TESLA will occupy other, especially high-volume vehicle segments. Model Y, Cybertruck, Cyberquad, Semi, Roadster and a compact car to be developed in China are already known. It does not require special clairvoyant skills to imagine the occupation of other vehicle segments in the order of their market attractiveness.
TESLA achieves the lowest manufacturing costs by courageously exploiting the technical efficiency potential and thus achieving very large economies of scale. The number of model variants is similar to that of mobile phones and many orders of magnitude lower than that of the competition. In this way, quantities can be bundled in order to reduce direct and indirect costs through significant economies of scale. A courageously low complexity of product, production and logistics such as that of the Model 3 or requirements-oriented technologies such as that of the Cybertruck also reduce investment and manufacturing costs. Market success, growing experience and responsive management all contribute to economies of scale.
TESLA uses network effects to increase customer benefits with an increasing number of vehicles. A network effect arises from the digital networking of vehicles and superchargers for accessible, available, affordable, simple, and fast charging. TESLA collects charging data of the existing vehicles and the growth of the vehicle population. On this basis, it noiselessly expands and compresses the network of superchargers in order to increase customer benefit. A second network effect arises from the collection of videos of real driving situations of the existing vehicles. It accelerates the introduction of autonomous driving through machine learning and its gradual provision for the vehicle population via software updates over-the-air. A third network effect arises from the collection of real operating data in order to improve the battery management of the existing vehicles, the charging speed and the service life of the batteries. Future network effects will be achieved for vehicles through on-demand services such as ride-hailing and for energy supply through a transaction platform. Through network effects in the growing vehicle population, TESLA increases the entry barrier into the market.
TESLA develops its business model step by step and shows foresight, prudence and responsiveness in the timing of strategic actions. Examples are the published master plans, the acquisitions of SOLARCITY, GROHMANN and MAXWELL as well as the short-term capital increase when shortsellers had to buy TESLA shares.
We advise you to develop and implement innovative business models so that, like TESLA, you can become a market player in a narrow oligopoly.